Latest Installment in the Net Neutrality Debate

Net neutrality is a principle designed to ensure individuals can access the Internet to get the information and resources they want without discrimination. That's good. As I discuss in great lengths in my book, unfettered access to the network can spur opportunity, innovation and prosperity for all. It's required to ensure the network can be a sustainable platform for change - with the potential to continue to improve the way we live our lives, conduct our politics, run our businesses, and impact our planet.

But, as with most things, the devil is in the details and what net neutrality really comes down to is government control and economics. How much control should government have over the running of the Internet? How do operators profit from the investments they make to build out the network? Of course, the intersection of these two questions is central to the debate.

Yesterday, the FCC proposed rules that would create more government control over the Internet and force Internet providers (including wireless) to treat all Web traffic equally. This would mean they couldn't block or slow traffic, presumably to prevent providers from treating competitors content differently and to make sure consumers have the freedom to use their computing devices to access any and every service they want. Again, in principle, that's a good thing. However, it may have unintended consequences.

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The reality is it could end up affecting the experience that we all have on the Internet. As you have probably heard, traffic on the Internet is doubling every two years (check out Cisco's Visual Networking Index for some mind-boggling stats on the growth of the network) and it takes investment to make sure that enough broadband is available to support all of that traffic. In many cases, it necessitates adding capacity and upgrading the underlying network, in other scenarios, it is about extending the reach of the existing network to a greater percentage of the population. To date that investment has been primarily taken on by the private sector, namely the Internet providers themselves.

These providers have been responsible for building out the infrastructure (from the wires/fiber optic cables to the routers, switches, etc.) and managing the traffic flowing through the network to ensure the experience is predictable and satisfactory. They would like the option to slow or limit the traffic of bandwidth hogging users or applications when they threaten to affect and degrade the access for all. This is becoming a very real problem as more and more users adopt media-rich applications and the providers (particularly on the wireless side) struggle to build out their networks to keep up. Just look at the recent New York Times article on the iPhone's affect on AT&T's network.

The problem is that, unless the service providers can identify additional revenue to justify the build out, there will be no incentive for them to do so. Typically, the Internet service providers, which have been regulated by the government, collect flat monthly fees, from customers for access to the network. The pricing structure may vary based on the type of connection that's available to that customer in that area, but there is no real difference in price between the customer that uses the Internet to send a few e-mails and the customer who spends all their time playing "World of Warcraft." The difference, however, to the provider is distinct - the more customers who adopt these bandwidth-intensive applications, the more capacity and bandwidth they will need to add and that requires identifying revenue streams to justify it. Now, the proposed plan does not prevent providers from changing their pricing plans or charging high-volume users more for their service. However, we all know that consumers tend to not want to spend more for things they are already getting now (we are fickle that way), so this could be a difficult sell.

What has started to happen (in regular market conditions) is that the providers have begun to establish relationships with with some content providers (who tend to be on the pro net neutrality side) to make sure user's experiences are satisfactory. We are seeing some revenue sharing that could (for example, Amazon and Sprint's deal or Yahoo! and AT&T's partnership) provide mutual benefit and ongoing incentives to build out the nework. However, these kinds of deals could be at risk depending on the details of net neutrality regulations.

There needs to be a way to protect the connections of everyone, which necessitates managing the flow of the traffic and most likely some prioritization. The irony is that once the network is upgraded to broadband connections, the capacity will be much greater and the need for "favoritism" diminish; but if this favoritism isn't allowed, the networks most likely won't get upgraded or built. And the very thing that network neutrality is intended to prevent - zero-sum discrimination - is the very thing that could result.

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3 Comments

Another way to speak of the irony: on faster networks, the only way to create "favorable" connections is to deliberately cripple "non-favorable" connections.

I do not see how either the Amazon or the Yahoo deal would be influenced by net neutrality legislation. At the same time, it is clear that such legislation could have unintended consequences. Could you briefly sketch scenarios where you see net neutrality impacting those agreements?

Do you know of any online white papers online advocating net neutrality?

Your new book sounds interesting. I look forward to hearing more about it.

It will really depend on the details of the legislation. The underlying goal of most of the deals we have seen is to more closely tie the services to the network's delivery capacity to ensure a consistent, always available, good experience. Net neutrality could affect these deals if they are deemed to be creating an environment that would promote favorable treatment of one type of traffic over another.

Is this a valid concern? While I personally haven't seen any reports or coverage of a provider favoring one type of traffic to the detriment of another, we have seen providers limit, slow or stop one type of traffic to protect the availability of others (you can check out the FCC's Comcast investigation). Was that the right or wrong thing to do? I could argue both sides.

The real question that I see is how do we create an environment with the right incentives to ensure we are making the investments in the network to support all the traffic - all the users and all the applications - today and in the future. (Ultimately creating a network that makes the need to prioritize moot).

I think the market is starting to work these things out - with deals such as those made by Amazon and Yahoo! that help the provider monetize their network. Could net neutrality legislation stifle some of these kinds of innovations? I think its a question we should ask as the potential rules, price controls and legislation work their way through the process.

There needs to be guidelines that ensure the equitable access of the Internet is preserved and doesn’t become exclusionary or unduly favor one type of service over another. And there needs to be innovation, in both technology and business models to ensure the network investments we need come to fruition. Ideally, any resulting net neutrality legislation will create an environment that supports both.

I really don't get your argument. About 80% of bandwidth is being used by about 10% of customers. The remaining 90% of us are paying many, many times more than our share to already.

If ISP's go to tiered pricing, charge more for heavy use, and that 10% don't want to pay for more, cry me a river. Where's the loss? Looks to me like we get 80% more capacity - and even if they leave totally, we're looking at a max of a 10% price increase (if all of them quit entirely, which is not likely) for 80% more bandwidth.

Why should the rest of us subsidize build-out that we don't use, subsidized by giving up the freedom to get our content from whoever we want, in a neutral manner? That's a real and significant societal cost we shouldn't have to bear. Why shouldn't the people driving the need for extra capacity pay for it?

Traditional flat rate pricing is like giving an all you can eat lobster and steak buffet. If you charge for what you get, people will exercise more moderation.

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